Failed Moves Lead to Fast Moves

What we had today was an orgy of failed patterns. As I mentioned on Sunday, all of the major indices had broken down out of huge symmetric triangles with the NASDAQ and small caps making new 5 year lows. I won't speculate on why, though I have some ideas, but the breakdowns all failed. I got the title of this post from Brain over at Alpha Trends and it nails exactly what happened today. All last week and yesterday you had bears banging their fist on the table calling for an "extreme capitulation" event where everyone goes into a state of panic and the Dow drops 1,000 or so more in a day. Wouldn't that have been nice? Everyone was expecting it and just when it looked like it might happen, reversal. From that failed breakdown we got this massive rally, the biggest in history. All major averages except the Russell 2000, curiously, were up more than 10% today. I think this chart from Moontrader over at Luna $ Ticks really captures the significance of the reversal and ensuing breakout:


I love this chart, it really demonstrates the power and utility of technical analysis. So where do we go from here? As I have been saying for weeks, I am looking for a bear market rally that will last 3-4 months from this bottom. Was today the bottom? We will only know with certainty after a few follow through days but after today I think the odds are very good that the lows for 2008 are in. Tomorrow is a big day with the FOMC meeting, then the negative GDP data is Thursday and I would expect a bear attack after both. Also, I am worried somewhat about the weakness in the Russell 2000 which, as you know, I think leads the way. We need to see that index play catch up over the next few days as the other indices consolidate. Despite some issues, I think the tide is finally turning for the bulls but I'm going to try and remain objective.